1. Theme 4 Revision

2. 1. What additional problems may a business face when marketing its product internationally?
• Consumer remoteness and difficulty in obtaining market information
• Different language and cultures
• Supplying a suitable product i.e. different safety standard.
• Import regulations i.e. Tariffs
• Fluctuations in exchange rates
• Increased costs of transport, insurance and documentation
• Products need to be adapted to meet different tastes, customs and climates
• Political and/or economic change
Protectionism
Protectionist measures are measures that a country uses to protect its own industry from foreign competition. This is often done to keep domestic firms open in a country and protect jobs. There are various forms of protectionism:
• Tariff
• Import Quota
• Government Legislation – including products standards, joint ventures
• Domestic Subsidies
• Keeping a currency artificially low
Why might a country such as India use tariffs? State two reasons & give positives and negatives of their use.
Explain what an export subsidy is and how it works. Refer the Chinese steel industry.

3. Methods of selling goods abroad
Direct sales from the UK – involve running and exports sales department and sending representatives abroad to meet foreign buyers directly.
Overseas agent – these are appointed (generally on a commission basis) to sell the goods on the firms behalf.
Overseas subsidiaries – instead of exporting a firm may decide to set up a factory overseas. This may e to manufacture the whole product, assemble a product or merely a sales outlet to market and sell the product.
Think of an advantage and drawback of using each method.
Dumping – When products can be sold cheaper when exported than in the domestic market
Infant Industry – Similar to an emerging market, except protected by a monopoly before competitors can emerge and copy

4. Business Size Global – Many Countries in Many Trade Zones
International – Few Countries in a Single Trade Zone
National – Many Areas of a Single Country
Regional – Few Areas of a Single Country
Local – Single Area of a Single Country

5. Business Size Examples
Global – Many Countries in Many Trade Zones
International – Few Countries in a Single Trade Zone
National – Many Areas of a Single Country
Regional – Few Areas of a Single Country
Local – Single Area of a Single Country
Logos

6. What is the purpose of the WTO?
State 5 differences between China and India.
What are the implications for the UK of China’s industrial expansion?
Define the terms comparative advantage and specialisation. Give an examples.
What is the difference between income per capita and standard of living? (include PPP in your answer)
Which country’s economy has grown the most over the past two years?
Growth rates over the past 2 years
USA 3%
China 8%
Kenya 5%

7. Let us see who can finish first!
Explain & give examples where possible the following terms:
Developed
Developing
Lesser developed
Emerging
Economic growth
GDP
BRICs
Purchasing Power Parity (PPP)
Human Development Index (HDI)
Standard of living
Income inequality
Invisible/visible exports
Invisible/visible imports
Balance of trade
Balance of payments
Start with student 1. Define/explain the first term to the rest of your group. If you can’t answer it, can the other students in your group give you a clue until you get it right. Then student 2 define/explain the second term and continue round until you have completed all terms. Make a note of any you are unsure on and I will define the term for you!
Let us see who can finish first!

8. Advantages/disadvantages to business from being a multinational
To what extent can they be controlled?
Advantages/disadvantages to host countries
Evaluation & Examples
Multinationals
FDI

9. Specialisation & Comparative Advantage
 Countries tend to specialise in producing products that they have a comparative advantage in i.e. they produce products that they are relatively better at producing than other countries; these are then traded internationally.
The Theory of Comparative Advantage states that each country should produce the goods it has a comparative advantage in and then trade them for goods they are less efficient at producing; this should result in all countries having more goods to consume increasing living standards.
Country
Product(s) the country has a Comparative Advantage in.
Reason for Comparative Advantage UK
Germany
China 
India
USA 
Saudi Arabia

10. Advantages to countries Disadvantages to countries
Which businesses may be the big winners?
Who are most under threat?
Globalisation

11. You have 90 seconds to see who on your table can write down the most reasons why firms decide to trade internationally or who can write down 12 reasons first!!!
1) Extending the product life cycle by selling in new markets – the international product life cycle
2) Selling product innovations in multiple markets e.g. Xbox 360, Apple iPhone – Larger markets, increased profitability
3) Global sourcing – Matalan may source their products from the round the world. This gives firms a wider variety of products (or raw materials) and cheaper prices.
4) Limited growth in domestic markets – Mothercare are now in a saturated market, the growth rate in the UK has been at around 1% per year; in the developing economies of Eastern Europe they are growing at 50% per year
5) Foreign competition in home markets – e.g. Aldi, Liddle, Walmart entering Tesco’s home market
6) Improvements in transportation or communication with countries - For example many UK call centres have relocated to India taking advantage of communication advances in order to access the lower costs of Indian operations.
7) Opening up of new markets - For example 15 years ago China was a relatively closed market but trade liberalisation has meant it has started opening up its market. This has given the opportunity to UK businesses such as Tesco to open up in a new market (China) and Jaguar to export to China.

12. 8). Backward innovation to developing countries
8) Backward innovation to developing countries. This links in with the international product life cycle. For example, Volks Wagen sold the old design of VW Beatle to Mexico after it had finished manufacturing and selling them in Europe & North America. They transported the production lines to Mexico where they produced and marketed the car. The backward innovation and low cost basic car was ideal for the less advanced lower income Mexican market. They became market leader with a product that had become outdated in the west
9) Economies of Scale – exporting abroad allows firms to lower their average cost.
10) Spreading risk – the more markets a firm trades in the more it spreads its risk. If a company is dependent in just one market it makes it vulnerable to uncertainties in that market such as:
 Recession
 New competitors entering the market
 New legislation (anti-smoking)
 Tastes changing in the market
11) Outsourcing Production – many companies outsource their production e,g, all Apple products (iPhones, iPad) are outsourced. A Chinese firm called Foxconn produces all Apple’s products. It is when a contract is given to a third party to produce the product.
12) Offshoring – this is when a company produces its own product in another country. For example Dyson produces its vacuum cleaners in Malaysia in its own factory.

13. Push and Pull factors that Prompt Trade
There are pull and push factors that prompt firms to trade internationally. A push factor is one that forces a firm to trade internationally, where a pull factor is an attractive reason for trading internationally. Explain why the following are push or pull factors:
Push Factors
Saturated markets - __________________________________
Competition - _______________________________________
Pull factors
Spreading Risk- _____________________________________
Economies of scale- __________________________________

14. Advantages of being a member of a bloc
Examples
Advantages of being a member of a bloc
Types e.g. common market, free trade area
What are the implications of the UK withdrawing from the single market?
Trading Blocs

15. Student A
Assessment of Markets
Write down 5 factors that a firm may take in to consideration when assessing a new market.
levels and growth of disposable income
ease of doing business
Infrastructure
political stability
exchange rate
Student B
Assessment of a Country as a Production Location
Write down 5 factors that a firm may take in to consideration when assessing a production location.
 costs of production
 skills and availability of labour force
 infrastructure
 location in trade bloc
 government incentives
 ease of doing business
 political stability
 natural resources
 likely return on investment

16. CAUSE AND EFFECT DIAGRAMS
Demand Pull
(demand exceeding
Supply)
Upward pressure
Put on wage rates
Cost Push
Price/Wage
Wage/price spirals
Firm’s costs
Increasing due to
raw materials
Inflation
Raw material
Cost Push Inflation
Interest rates likely
to rise to
reduce spending
CAUSE AND EFFECT DIAGRAMS

17. Country
Type of Consumers
Elasticity Implications
China
Brazil
Kenya
USA
Poland
What is the price elasticity of the following products? Give an example of each?
Necessity
Luxury
Inferior
What is the income elasticity of the following products? Give an example of each?
Necessity
Luxury
Inferior
How do the consumers differ in these different countries?
What is the implication for the consumers’ purchasing power in the different markets (i.e. how price sensitive are they likely to be)?
What are the implications for different types of products in the different markets?

18. The formula for calculating income elasticity is:
% Change in demand divided by the % change in income
Normal Goods
Normal goods have a positive income elasticity of demand so as consumers' income rises more is demanded at each price i.e. there is an outward shift of the demand curve
Normal necessities have an income elasticity of demand of between 0 and +1 for example, if income increases by 10% and the demand for fresh fruit increases by 4% then the income elasticity is Demand is rising less than proportionately to income.
Luxury goods and services have an income elasticity of demand > +1 i.e. demand rises more than proportionate to a change in income – for example a 8% increase in income might lead to a 10% rise in the demand for new kitchens. The income elasticity of demand in this example is
Inferior goods have a negative income elasticity of demand meaning that demand falls as income rises. Typically inferior goods or services exist where superior goods are available if the consumer has the money to be able to buy it. Examples include the demand for cigarettes, low-priced own label foods in supermarkets and the demand for council-owned properties.

19. The following are reasons for takeover/merger/joint venture.
Spreading risk over different countries/regions
Entering new markets/trade blocs
Acquiring national/international brand names/patents
Securing resources/supplies
Maintaining/increasing global competitiveness
Reaping economies of scale

20. What external factors might impact on the global competitiveness of a firm?
Exchange rates
Shortage of skilled or unskilled labour
Changes to the market access e.g. to a trading bloc, changes in a country’s tariff rates
What internal factors might determine the competitiveness of a business?
Product differentiation – brand, USP, marketing, amount invested in R&D (scientific research)
Cost competitiveness – production at low cost, economies of scale, lean production techniques, outsourcing, offshoring – allowing the product to be sold at a more competitive price

21. Strong or Weak pound?
Imagine that the value of the pound is strong. State whether the following firms will benefit form a strong pound or whether it will be detrimental.
detrimental
1. Rolls Royce exporting aero-engines to the USA
Benefit
2. BMW importing cars for sale in the UK
detrimental
3. A British textile producer who produces and sells shirts in the UK
4. British Airways who have to pay in US dollars for all is fuel
Benefit
5. Curry’s who buys most of its electrical goods from overseas
Benefit
6. Morrison’s who wish to prevent a hostile takeover bid from the USA
Benefit
Benefit
7. BT wanting to takeover an American telephone company
detrimental
8. A British firm exporting a price inelastic product

22. CAUSE AND EFFECT DIAGRAMS
What type of exports will benefit the most?
Lack of
competitiveness,
trade deficit
Cheaper exports, UK
firms more competitive
Low interest rates
Cheaper for foreign
firms to take over
UK firms
LOW VALUE OF POUND
Bank of England
buying Foreign
currency, selling
pounds
Imports more expensive
Who benefits and who loses out?
CAUSE AND EFFECT DIAGRAMS

23. CAUSE AND EFFECT DIAGRAMS
Lack of
Competitiveness
of firms
Exports become
cheaper
when pound falls
Low interest rates,
encouraging UK
spending
increasing imports
Reduces value of
pound
Trade Deficit
(Balance of Payments)
Strong (overvalued)
Pound
Money flowing
out of UK
CAUSE AND EFFECT DIAGRAMS

24. Global Localisation – Global Strategy
Student A
Explain what the definition of global localisation, give an example and state the advantages and disadvantages of it.
Student B
Explain what the definition of global strategy, give an example and state the advantages and disadvantages of it.

25. Task: please match the term to the definition
Ethnocentric (domestic) approach
Polycentric (international) approach
Geocentric (mixed) approach
This is where a business uses a combination of ethnocentric and polycentric marketing approaches. This is sometimes known as ‘glocalisation’ approach; this can be summed up by the phrase ‘think global, act local’. An example of this mixed approach is McDonald’s.
Businesses plan and adapt their product to meet the needs of local consumers. This involves developing and marketing different products for different markets. For example, General Motors adapt their products to meet the needs of the local consumers.
This is where overseas markets are seen as identical or very similar to domestic markets. Therefore, they assume that what has been successful in the domestic market will be will be good in the overseas markets.

26. Global Niche Markets Advantages Disadvantages
Ability to specialise in the product, and meet specific needs
Listen to customer feedback
Products tend to be price inelastic, therefore premium pricing strategy can be used
Smaller markets allow better customer relationships
Economies of scale can never be a sound advantage
Market can become self saturated and difficult to expand organically
Success may attract larger businesses to compete and bring to mass market
Narrow consumer interest can change easily

27. Cultural/social factors
What cultural/social factors would a business have to consider when looking to trade internationally?
different tastes
cultural differences
language
unintended meanings
inappropriate/inaccurate translations
inappropriate branding and promotion

28. Advantages/disadvantages to business from being a multinational
This is the same slide as the FDI one, just a different context
Advantages/disadvantages to business from being a multinational
To what extent can they be controlled?
Advantages/disadvantages to host countries
Evaluation & Examples
Multinationals

29. Thoughts on Pressure Groups
To what extent can pressure groups control businesses?
What type of business are most/least likely to be affected by pressure groups?
Explain the ‘trade off’ between a firm becoming more ethical and increased costs? Is this likely to increase or decrease sales/revenue/profit?

30. Country
Characteristics
GDP per capita
Developed Developing
Lesser Developed
Human Resource Index – locating there
Income Elasticity implications for luxury goods
China
India UK
Malaysia
Kenya
Brazil
Poland

31. 4 Mark Numerical Question
Numerical answers > write out the formulae, show all working and then the answer.
Fully label all diagrams > axis, curves and give a title.

32. 4 Mark Question
Definition
Give 2 examples related to the business in the case study
Develop your point e.g. state a consequences….. This will result in ….

33. Assess 2 factors – 8 marks question
Define the term
State first factor applied to the case study
This will result in …………….
However, ………….. (counterbalance/extent)
Repeat in new paragraph for second factor

34. Medium Answer Technique – Assess questions (10 or 12 marks)
Define main term
State your advantage > Relate to the business & case study (example) > analyse ‘this will result in’….. ‘However,’ > evaluate your point
Counterbalance with your disadvantages > Relate to the business & case study (example) > analyse ‘this will result in’….. ‘However,’ > evaluate your point
Conclusion – make a judgement or recommendation supported by evidence recognising which arguments are the most important.

35. 20 mark Evaluate – Two option question
Define main term
State your advantage of option 1 > Relate to the business & case study (example) > analyse ‘this will result in’….. ‘However,’ > evaluate your point
Counterbalance with your disadvantages of option 1> Relate to the business & case study (example) > analyse ‘this will result in’….. ‘However,’ > evaluate your point
State your advantage of option 2 > Relate to the business & case study (example) > analyse ‘this will result in’….. ‘However,’ > evaluate your point
Counterbalance with your disadvantages of option 2> Relate to the business & case study (example) > analyse ‘this will result in’….. ‘However,’ > evaluate your point
Conclusion – make a judgement or recommendation supported by evidence recognising which arguments are the most important.

36. This will lead to ………………………(applied) However, ……………………….. (applied)
Therefore, for any question 8 or over marks in each main paragraph you need to;
Make point (applied)
This will lead to ………………………(applied)
However, ……………………….. (applied)

37. Types of protectionism Reasons for protectionism
Impact on firms
Impact on consumers
Protectionism

38. Advantages of being a member of a bloc
Examples
Advantages of being a member of a bloc
Types e.g. common market, free trade area
What are the implications of the UK withdrawing from the single market?
Trading Blocs

39. Takeover, Mergers & Joint Ventures
Advantages
Disadvantages
Synergy
Takeover, Mergers & Joint Ventures

40. Global Competitiveness

41. Advantages of operating in them Disadvantages of operating in them
Global Niche Markets